Topic Test Answers

David has a credit card with an APR of 13.59% and a 30-day billing cycle. The table below details David’s transactions with that credit card in the month of November. Date Amount ($) Transaction 11/1 1,998.11 Beginning balance 11/5 43.86 Purchase 11/16 225.00 Payment 11/23 61.21 Purchase Between the previous balance method and the daily balance method, which method of calculating David’s November finance charge will result in a greater finance charge, and how much greater will it be?

The higher interest rate of a cash advance on a credit card with an existing balance can be eliminated by paying the cash advance back within four weeks.

You are planning to buy one of two brands of sofas, which you hope to use over the next twenty years. Brand J costs $975 and lasts for about twenty years. Brand K costs $265 and lasts for about five years, so you will need to buy four Brand K sofas to equal one Brand J sofa. In either case, you plan to pay for your sofa using your credit card, which has an interest rate of 14.55%, compounded monthly. You can pay off a Brand J sofa with eight years of monthly payments, and you can pay off a Brand K sofa with three years of monthly payments. Assuming that you make no other purchases on your credit card, over twenty years, which brand will be cheaper, and how much cheaper will it be? (Round all dollar values to the nearest cent.)

Antonio's credit card has an APR of 16.65%, and it calculates his finance charge by using the daily balance method and a 30-day billing cycle. On June 1st, Antonio had a balance of $811.67. During the month of June, he made a payment of $110.16 and a purchase of $84.04. How much greater will his June finance charge be if the purchase occurred on June 5th and the payment occurred on June 23rd than it would be if the payment occurred on June 5th and the purchase occurred on June 23rd?

Eli is a loan officer. He determines his clients’ eligibility for loans and for good interest rates by using their credit scores. The scores of several clients are shown in the following table.NameExperianEquifaxTransUnionRoy750792661Dirk771707755Haley643642770Valerie646773762Help Eli evaluate his applicants based on their mean and median credit scores.

You are planning to buy one of two brands of sofas, which you hope to use over the next twenty years. Brand J costs $975 and lasts for about twenty years. Brand K costs $265 and lasts for about five years, so you will need to buy four Brand K sofas to equal one Brand J sofa. In either case, you plan to pay for your sofa using your credit card, which has an interest rate of 14.55%, compounded monthly. You can pay off a Brand J sofa with eight years of monthly payments, and you can pay off a Brand

Bob’s car needs a new transmission, a repair that will cost $1,763.00. Bob does not have enough money in his savings account to cover the cost of the repair. To make matters worse, Bob’s mechanic, who works out of his home, is unable to accept credit cards. Bob is hesitant to take out a cash advance on his credit card knowing that it will take him 12 months to pay of the balance and that a cash advance comes with a 30% interest rate. If Bob uses a cash advance to pay for the repairs, how much extra will he have to pay in interest?

Robby is considering taking out a cash advance on his credit card to purchase a new television. His credit card offers cash advances up to $500.00 at an interest rate of 28% compounded monthly. If the television costs $350.00 and Robby plans to pay the balance of in 6 months, how much extra will he pay in interest to purchase the television?

Felicia paid $2,879 for a new wall oven with her credit card. Felicia’s credit card has an APR of 13.89%, compounded monthly. It took Felicia seven years of identical monthly payments to pay for her oven, and she made no other purchases with her card until it was paid off. Over the ten years that she kept the oven, it used an average of $2.97 per week in electricity. Between the electricity and the interest, which component of the lifetime cost of the oven was greater, and how much greater was it? (Round all dollar values to the nearest cent.)

Harriet used her credit card to buy a $779 laptop, which she paid off by making identical monthly payments for two and a half years. Over the six years that she kept the laptop, it cost her an average of $0.36 of electricity per day. Harriet’s credit card has an APR of 11.27%, compounded monthly, and she made no other purchases with her credit card until she had paid off the laptop. What percentage of the lifetime cost of the laptop was interest? (Assume that there were two leap years over the period that Harriet kept the laptop, and round all dollar values to the nearest cent.)

Jason’s credit card has an APR of 17.02% and a 30-day billling cycle. The following table details Jason’s transactions with that card in the month of June.DateAmount ($)Transaction6/1746.28Beginning balance6/9140.00Payment6/1528.76Payment6/1869.49PurchaseBetween the adjusted balance method and the daily balance method, which method of computing Jason’s June finance charge will result in a greater finance charge, and how much greater will it be?

Tim would like to use his income tax return to pay off one of his four credit cards. His previous plan was to pay off all four credit cards in the same timeline of 36 months. He wants to eliminate the card that is charging him the most interest on a monthly basis. The chart below outlines Tim's four credit cards, their balances, and their APRs. Which credit card should Tim use his tax return to pay off? Credit CardBalanceAPRA$1,260.0012%B$900.0018%C$1,290.009%D$1,200.0016%

Esteban bought a new stove for $986 on his credit card. He used the stove for eleven years before replacing it. The stove cost him an average of $0.14 per day in electricity. Esteban had preventive maintenance done on the stove, costing $24.25 each year for the eleven years. Esteban’s credit card has an APR of 9.26%, compounded monthly. He paid off his balance by making identical monthly payments for five years. Sales tax in Esteban’s area is 8.22%. Assuming that Esteban made no other purchases or payments with his credit card, what was the lifetime total cost of the stove? (Assume that two of the years Esteban had the stove were leap years, and round all dollar values to the nearest cent.)

Megan’s TV had a base price of $189 and the sales tax was 6.88%. Over the next four years, the TV consumed an average of $0.06 of electricity every day. It also needed repairs twice, costing $29 each time. After four years, Megan got a new TV. What was the lifetime cost of Megan’s TV? (Remember that one in every four years is a leap year.)

Christopher has a credit card with an APR of 13.13%. The card uses the adjusted balance method to calculate finance charges. The following table details Christopher’s transactions with his credit card in the month of December.DateAmount ($)Transaction12/1424.86Beginning balance12/355.25Payment12/578.10Purchase12/1420.00Payment12/1627.97Purchase12/228.16Purchase12/2946.07PurchaseIf Christopher is on a 30-day billing cycle, what will his new beginning balance be after December?